hange for the Exchange

Published 4:00 am, Friday, August 30, 1996

1996-08-30 04:00:00 PDT SAN FRANCISCO -- After almost a year of hunting, the restless and growing Pacific Stock Exchange in San Francisco is narrowing its search for a new and larger home.

San Diego and Oakland have come on strong, enticing the stock exchange with attractive sites to house its staff and an army of financial traders.

But San Francisco still is the top suitor. Among the sites with existing buildings, the two most workable for the stock exchange are the Fashion Center at 699 Eighth St., and a large office building at 155 Fifth St., a block from the Moscone Convention Center.

"We'd prefer to stay in San Francisco, and those sites meet our physical requirements," said Dale Carlson, the PSE's vice president for corporate affairs. "That's more than you can say for the other 2,000 buildings in town. Having so few options available is a bit disconcerting."

Altogether, stock exchange officials are seriously looking at 10 to 12 sites. Most are in San Francisco's South of Market area, where parking, transportation and rental rates are more favorable than in the Financial District. However, none so far has really dazzled the PSE.

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In addition to visiting San Diego and Oakland, the PSE has spoken to officials from San Jose, Palo Alto, Santa Clara County, Alameda County, Seattle, Phoenix and other places.

The 114-year-old stock exchange is quickly outgrowing its aging granite temple in the Financial District at 301 Pine St. The building is owned by the Empire Group, a San Francisco real estate investment firm.

Under its lease, the PSE has options to stay at the building for 40 years, but Carlson said the exchange planned to move by the end of 2000.

The PSE needs at least 250,000 square feet for two stock and options trading floors, corporate offices for 300 employees, a data center, and offices for brokerage firms and other financial services. High ceilings of 20 feet or more are needed for the trading floors.

The Fashion Center and the Fifth Street highrise have enough space for trading floors and offices, Carlson said.

The Fifth Street site is a spacious, 15-story highrise with 400,000 square feet. Continental Development Corp. owns the building and leases it to Wells Fargo & Co., which uses it as an operations center for check processing and other accounting procedures.

Wells Fargo's lease expires March 31, 1999. Bank spokeswoman Lorna Doubet said Wells Fargo planned to stay at the Fifth Street building at least until then.

Wells Fargo is busy absorbing First Interstate, the large Los Angeles bank they acquired earlier this year. Wells Fargo executives are weighing whether to move some of their financial operations to Southern California.

A big obstacle for the stock exchange comes from the next Moscone Center expansion, which takes place on the same block as the Fifth Street building coveted by the PSE.

Since San Francisco voters in March approved Prop. A, which will raise $157 million in bonds for the Moscone Center project, city officials have moved ahead with plans to build a three-story, 300,000-square-foot convention facility at Fifth and Howard streets.

Speculation has arisen that business leaders would like The City to acquire or demolish the Fifth Street building, clearing the entire block for the Moscone Center expansion.

"That site is up in the air at this point," a local businessman said. "They're in the early stages (of the expansion), but some would like to see that whole block leveled."

Bob Gamble, deputy executive director of redevelopment, said he had not heard of any suggestion to stretch the redevelopment area as far as Fifth Street.

In San Francisco, the stock exchange also is eyeing the troubled Fashion Center, a 740,000-square-foot building at Eighth and Townsend streets that was built in 1990 by an Atlanta developer called Portman Cos.

Hurt by big nationwide retailers in the apparel industry, the Fashion Center has never made a profit, leasing barely half of its showroom space to smaller clothing manufacturers. Recently, a consortium of lenders led by Mellon Bank of Pittsburgh took over the building from Portman.

Since then, four serious investors have looked at the Fashion Center. Industry sources say Trammell Crow Co., the giant Dallas developer, is on the verge of buying the building for nearly $30 million from the banks.

Trammell Crow has reached an "agreement in principle" to acquire the Fashion Center, with the deal possibly closing in 30 to 40 days, according to business people close to the talks.

Trammell Crow may retrofit the Fashion Center for $30 million, converting half of the property to retail and office space leased to a big retailer and technology and multimedia companies. The other half of the property may be leased to apparel manufacturers or the stock exchange.

For the stock exchange, the Fashion Center offers large exhibition space, an atrium setting with natural light, 550 to 750 parking spaces, and proximity to the freeways and the CalTrain station.

Trammell Crow, the largest commercial real estate services firm in the country, owns $8 billion in properties. Since the real estate crash of the 1980s, the company has endured some painful financial restructuring.

Earlier this year, a Crow subsidiary emerged from bankruptcy to refinance 50 commercial properties and $295 million in loans from lenders. In another recent refinancing mess, Trammell Crow stopped the foreclosure of the Dallas Market Center, its big wholesale trade complex in Dallas, by paying off $450 million in mortgages owed to its main lenders.

Now, the revived Trammell Crow is expanding its wholesale trade business. The company bought the Boston Design Center in December, and last month it announced a joint venture to run a wholesale gift trade show in Las Vegas.

"If they can find the right mix of tenants in San Francisco, the Fashion Center would be great for them," said a local business person.

Also in San Francisco, two other dark-horse contenders include: a vacant site owned by developer Matthew Witte at Third and Mission streets near the Yerba Buena Center, and a large block owned by the U.S. Postal Service and Caltrans and bordered by Folsom, Harrison, Main and Beale streets.

Among the out-of-towners, San Diego is staging the heaviest courtship. Mayor Susan Golding and city officials have offered to convert their City Hall building to accommodate the stock exchange.

"We tried to dissuade them, but they kept coming back with this extraordinary deal," Carlson said.

The proposal includes 28,000 square feet, a 40-foot high ceiling, and plenty of space for offices and a data center. The PSE would pay no utility tax and only $2,000 in business taxes, compared with the $200,000 a year it's paying now. Rental rates would be in the low teens, compared with the $25 a square foot per year for its Financial District home.

The lifestyle and culture of San Diego, good transportation, ideal weather, plenty of parking and a well-educated work force make the offer appealing, Carlson said.

A short drive away in Oakland, city leaders are offering space in the Kaiser Center, its downtown highrise gem on Lakeside Drive. The 28-story office building overlooks Lake Merritt, and also houses the offices of the University of California president.

"We're still willing to consider anything to welcome them to Oakland," said Antoinette Hewlett, assistant director of Oakland's Community and Economic Development Agency.

San Diego and Oakland officials have gone out of their way to help the PSE, Carlson said, but the stock exchange's members still prefer San Francisco.

"San Francisco has been our home for over 100 years," Carlson said. "We would have to exhaust every possible alternative before we would move out of town."

By the end of the year, a PSE search committee will make site recommendations to the stock exchange's board of directors.&lt;